Doug Foshee. Bank of America Investment Conference September 19, President & Chief Executive Officer

Transcription

1 Doug Foshee President & Chief Executive Officer Bank of America Investment Conference September 19, 2006 the place to work the neighbor to have the company to own

2 Cautionary Statement Regarding Forward-looking Statements This presentation includes forward-looking statements and projections, made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of The company has made every reasonable effort to ensure that the information and assumptions on which these statements and projections are based are current, reasonable, and complete. However, a variety of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this presentation, including, without limitation, changes in unaudited and/or unreviewed financial information; our ability to implement and achieve our objectives in the 2006 plan, including achieving our debt-reduction, earnings and cash flow targets; the effects of any changes in accounting rules and guidance; our ability to meet production volume targets in our Exploration and Production segment despite delays in resuming production shut-in due to hurricanes Rita and Katrina; uncertainties and potential consequences associated with the outcome of governmental investigations, including, without limitation, those related to the reserve revisions and natural gas hedge transactions; the outcome of litigation, including shareholder derivative and class actions related to reserve revisions and restatements; our ability to comply with the covenants in our various financing documents; our ability to obtain necessary governmental approvals for proposed pipeline projects and our ability to successfully construct and operate such projects; the risks associated with recontracting of transportation commitments by our pipelines; regulatory uncertainties associated with pipeline rate cases; actions by the credit rating agencies; our ability to successfully exit the energy trading business; our ability to close our announced asset sales on a timely basis; changes in commodity prices for oil, natural gas, and power and relevant basis spreads; inability to realize anticipated synergies and cost savings associated with restructurings and divestitures on a timely basis; general economic and weather conditions in geographic regions or markets served by the company and its affiliates, or where operations of the company and its affiliates are located; the uncertainties associated with governmental regulation; political and currency risks associated with international operations of the company and its affiliates; competition; and other factors described in the company s (and its affiliates ) Securities and Exchange Commission filings. While the company makes these statements and projections in good faith, neither the company nor its management can guarantee that anticipated future results will be achieved. Reference must be made to those filings for additional important factors that may affect actual results. The company assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by the company, whether as a result of new information, future events, or otherwise. Non-GAAP Financial Measures El Paso uses the non-gaap financial measure earnings before interest expense and income taxes or EBIT to assess the operating results and effectiveness of the company and its business segments. The company defines EBIT as net income (loss) adjusted for (i) items that do not impact its income (loss) from continuing operations, such as extraordinary items, discontinued operations, and the impact of accounting changes; (ii) income taxes; (iii) interest and debt expense; and (iv) distributions on preferred interests of consolidated subsidiaries. The company defines EBITDA as EBIT plus Depreciation, Depletion and Amortization. 2

3 Our Purpose El Paso Corporation provides natural gas and related energy products in a safe, efficient, and dependable manner 3

4 Leading Natural Gas Pipelines 26% total U.S. interstate pipeline mileage 1/3 of daily U.S. throughput Best market connectivity Best supply access Leading pipeline integrity program Mojave Pipeline El Paso Natural Gas Colorado Interstate Gas Mexico Ventures Wyoming Interstate Cheyenne Plains Pipeline Great Lakes Gas Transmission (50%) ANR Pipeline Tennessee Gas Pipeline Southern Natural Gas Elba Island LNG Florida Gas Transmission (50%) 4

5 Overview Pipelines having terrific year EBIT up 13% for first six months Despite positive items last year, hurricane costs this year Expansion inventory continues to build 4% 6% EBITDA growth over next 3 5 years But, equally focused on safety, integrity of pipelines 5

6 El Paso Pipelines Total Integrity Management Program (TIM) Developed TIM in 2001, before Pipeline Safety Act Adopted best practices of El Paso, Sonat, and Coastal inspection and maintenance programs Combined operations into one organization Program approved by Board of Directors Regular reviews by Health, Environmental, & Safety BOD committee Industry-leading program 6

7 Total Integrity Management Program As of August 2006 Category Onshore 6" Offshore Storage < 6" New lines Total Mileage 42,798 2, , ,361 Total Integrity Management Program In-line Inspection Program Offshore Integrity Program Storage Integrity Program Area site-specific plans direct assessment Lines installed from 2003 forward are not counted in the mileage; they will be ILI d within 10 years of in-service 7

8 In-line Inspection Program Status 45,000 42,798 ILI Program Miles 40,000 Miles 35,000 30,000 25,000 20,000 42% 46% 52% 58% 63% 66% 72% 15,000 10,000 5,000 0 Pre E Cumulative 1 st ILI Cumulative repeat ILI Annual 1 st time ILI Annual repeat ILI 8

9 In-Line Inspection Costs O&M and Capital 160, ,000 $ Thousands 120, ,000 80,000 60,000 40,000 20, Base ILI Capital Capital Supplemental Capital Repairs O&M ILI & Repairs 9

10 Pipeline Safety Improvement Act Signed by President Bush December 17, 2002 Key points: Identify high consequences areas (HCAs) Develop integrity management program (IMP for HCAs) Perform ongoing assessments of pipeline integrity (ILI, hydro-testing, direct assessment) Data integration and risk assessment Implement additional preventive and mitigated action Program completion Milestones Top 50% HCAs: December 17, 2007 Remaining 50%: December 12,

11 Comparison of Rule and Total Integrity Management Program Scope Rule Limited to HCA s (1,902 sites and approx. 1,234 miles) TIM All facilities ILI >6" onshore (42,798 miles) Timing 50%: December %: December %: December 2012 Assessments ILI, Hydro, Direct Assessment Primarily ILI and site specific plans Threats External corrosion Internal corrosion Stress corrosion cracking Manufacturing Construction Operator error Third party damage Weather and outside forces Equipment Original focus internal and external corrosion 11

12 How Do We Perform the In-line Inspection? 12

13 In-line Inspection Program Year 1 Make piggable Year 2 In-line inspect Immediate repairs Year 3 and 4 Remediate Annual overlap: Make piggable ILI previous year make piggable Address any immediate repairs from ILI run Remediate scheduled anomalies 13

14 Make Piggable: Scope and Obstacles Scope Install pig launchers and receivers Replace main line valves as required Generally plug or reduced size Address Obstacles An area where the tool cannot pass through Managing outages 14

15 Launcher/Receiver A launcher/receiver is installed to insert, launch, and/or receive pigs/tools 15

16 Valve Setting Most original valves will not allow pigs to pass These must be replaced 16

17 Obstacles: What about Rivers? Most river crossings were built with a header and multiple line crossings These are replaced Conventionally, or Directional drill, or Install traps at river 17

18 Obstacles: Gas Operations and Engineering Some lines cannot be taken out of service Important laterals and some mainlines Use Stopple Bypass 18

19 High Resolution MFL Inspection Pig 19

20 Loading Inspection Pig into Pig Launcher 20

21 Magnetic Flux Leakage Principle Each MagneScan tool carries powerful permanent magnets which are coupled to the pipe wall by high-density brushes, to induce a magnetic field in the pipeline steel 21

22 Magnetic Flux Leakage Principle When the tool passes a location where the amount of metal in the pipe wall has been decreased by a corrosion pit, for example a leakage of magnetic flux takes place 22

23 Commitment to Integrity Committed to industry-leading program Established accountabilities and continuous improvement objectives Developed aggressive and comprehensive strategy and programs to achieve our objectives Committed the resources to implement the program through a continuous program 23

24 Appendix 24

25 Unprecedented Growth Growth project portfolio approximately $3 Billion WIC Kanda Lateral Up to $137 MM January 2008 Up to 333 MMcf/d WIC Piceance Pipeline $134MM March MMcf/d WIC/CP Opal to Cheyenne or Greensburg $39 $63 MM January Mdth/d CPG Yuma Lateral $22 MM November MMcf/d ANR STEP $95 MM 2007/08 27 Bcf / 412 MMcf/d Front Range Market Delivery Infrastructure $148 MM 2008/2009 ANR Wisconsin 2006 $47 MM November MMcf/d TGP NE ConneXion New England $111 MM November MMcf/d TGP Essex- Middlesex $38 MM November MMcf/d TGP NE ConneXion NY/NJ $26 MM November MMcf/d EPNG Arizona Storage $115 MM Bcf / 350 MMcf/d EPNG Sonora Lateral $91MM 2009/ MMcf/d Mexico JV- LPG Reynosa $53 MM (50%) July ,000 Bbl/d Mexico JV - Sonora $406 MM (33%) ,000-1,250 MMcf/d FERC Certificated/Under Construction Signed PA s Future Projects CIG Raton Basin Expansions $91MM MMcf/d Continental Connector $TBD MMcf/d TGP/ANR Eugene Island 371 $16 MM Nov - Dec MMcf/d TGP LA Deepwater Link $31 MM April MMcf/d SNG Elba Expansion II $158 MM February MMcf/d SNG Elba Expansion III & Elba Express $850 MM Bcf / 900 MMcfd SNG Cypress Phase I / II $241 MM / $18 MM May 2007 / Mid MMcf/d / 116 MMcf/d SNG Cypress Phase III $61 MM May MMcf/d FGT Phase VII Part I and II $63 MM / $0 MM May 2007 / May MMcf/d / 20 MMcf/d 25

26 Doug Foshee President & Chief Executive Officer Bank of America Investment Conference September 19, 2006 the place to work the neighbor to have the company to own